Plan reportedly denied coverage to sick children in need of nursing care by "fraudulently" shifting their claims to Illinois' Medicaid program

February 24, 2011

Illinois' largest health insurance company will pay $25 million to settle allegations that it denied coverage to sick children in need of nursing care by "fraudulently" shifting their claims to the state's Medicaid program.

The settlement, reached by Illinois Attorney General Lisa Madigan and U.S. Attorney Patrick Fitzgerald, follows several years of complaints from patients and their families. The patients reached out to Madigan's office after their claims were denied by Blue Cross and Blue Shield of Illinois.

The cost of the medical care, which included private-duty nurses for sick children and other ill patients, should have been covered by Illinois Blue Cross but was shifted to Medicaid at a cost of nearly $12 million, prosecutors said. The claims were denied based on "internal, undisclosed guidelines that were more restrictive than the language provided to patients in plan policy materials," Madigan's office said.

"Blue Cross Blue Shield's inappropriate denial of legitimate claims placed an undue burden on the state's finances," Madigan said in a statement.

Because the Medicaid health insurance program for the poor is funded by state and federal tax dollars, Illinois and the U.S. Treasury will share in the proceeds from the settlement. Illinois Blue Cross will pay the state $14.25 million and the federal government $9.5 million; $1.25 million will go to Illinois consumers who were denied coverage by Illinois Blue Cross but did not receive Medicaid coverage.

In a statement to the Tribune, Illinois Blue Cross denied any "inappropriate conduct."

"This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies," Illinois Blue Cross spokesman Jack Segal said. "Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans."